Rates of Tax • Gains are taxed at 20%, or at 10% to the extent that an individual has any unused part of the basic rate band. However if disposing of a residential property, gains (not eligible for Private Residence Relief) are taxed at 28% or 18%. Using Spouse Exemption • Every individual is entitled to an annual exemption so consideration should always be given to including spouses/civil partners in capital gains tax planning strategies, such as: • Transferring Assets before a Sale Transfers between spouses and civil partners, who are living together, are effectively exempt (they are treated as taking place for a consideration which gives rise to neither gain nor loss). But remember transfers to children are subject to capital gains tax in the normal way. Bed & Breakfasting • A sale of shares triggering a gain which would not result in a payment of tax (because of the availability of an annual exempt amount, losses – or both) is a valid planning strategy. • However this strategy will not work if the shares are repurchased (by the same individual) within 30 days. • Planning strategies could involve a repurchase by a spouse/civil partner, within an ISA, by trustees, within a pension arrangement or simply deferring the repurchase until the 30 day period has passed (assuming there are no adverse investment issues of course!).

Child Allowance If your taxable earnings are between £50,000 & £60,000, making a well timed pension contribution can restore any child allowance that may have been lost, and potentially achieve up to 60% effective tax relief by making a pension contribution. Here’s how Gary & Julie have 2 children that they claim child benefit for. In 2016/2017 that would ordinarily mean entitlement to a total benefit of £1,789. Gary’s income of £58,000 will, however, result in a separate tax charge that will claw back some of this benefit – a ‘high income child benefit charge.’ Gary doesn’t pay any personal pension contributions, or pay anything under gift aid (the other payment type that reduces his income for this purpose) so his adjusted net income is £58,000. The excess income is £8,000, which at a rate of 1% for every £100 excess, results in a tax charge equal to 80% of the benefit: £8,000 x 1% x £1,789 = £1,431 What to do? A contribution to a personal pension can protect this benefit entitlement. To fully protect the benefit, ‘adjusted net income’ will need to be cut down to £50,000 or below. A gross contribution of £8,000 paid before 6th April 2017 will be adequate, which costs Gary £4,800 after higher rate income tax relief has been accounted for. This contribution can be paid by Gary, or it can be paid by someone else on Gary’s behalf: Julie could pay it to Gary’s pension plan and the effect would be the same: a third party contribution is treated for tax purposes as though it was paid by the member. Voila! Gary now has another £8,000 in his pension fund at a cost of £4,800 AND the the child allowance remains intact - equivalent to another £1,431 into the family kitty. Want to know more? Do not hesitate to contact us if you would like further details.

Personal Allowance If your taxable earnings are over £100,000 your personal allowance is reduced by £1 for every £2 your income exceeds this threshold. That means that earnings between £100,000 and £122,000 are effectively taxed at 60% It is possible however to restore the Personal Allowance and potentially achieve up to 60% effective tax relief by making a pension contribution. Here’s how Carol’s total ‘relevant’ earnings (including P11D benefits) are £124,500. By making a GROSS pension contribution before the end of the tax year of £14,500 Carol would receive a sizable amount of tax relief on the contribution. The first £2,500 of the contribution would attract 40% tax reief (£1,000) and the remaining £12,000 would attract 60% tax reief (£7,200) by ‘reclaiming’ £6,000 of the Personal Allowanve. That makes Carol’s nett contribution (after all tax reliefs) only £6,300 - with £8,300 being provided by HMRC. Now for the fun part! Carol has already decided to reduce her working hours - and hence her salary - from the start of April and if required, she could access that £14,500 contribution. £3,625 would be tax free and the remaining £10,875 taxed as income. Even if 40% tax was paid on the £10,875, that would still provide Carol with £10,150 after tax. Voila! That is an increase of over 60% (before charges) of Carol’s initial £6,300 outlay. Want to know more? Do not hesitate to contact us if you would like further details.

Exempt gifts to use before the end of the tax year! Some gifts made during your lifetime are exempt from IHT because of the type of gift or the reason for making it. Wedding or civil partnership ceremony gifts are exempt from IHT, subject to certain limits: • parents can each give cash or gifts worth £5,000 • grandparents and great grandparents can each give cash or gifts worth £2,500 • anyone else can give cash or gifts worth £1,000 Small gifts • You can make small gifts up to the value of £250 to as many individuals as you like in any one tax year. However, you can't give more than £250 and claim that the first £250 is a small gift. If you give an amount greater than £250 the exemption is lost altogether. You also can't use your small gifts allowance together with any other exemption when giving to the same person. • Regular gifts or payments that are part of your normal expenditure • Any regular gifts you make out of your after-tax income, not including your capital, are exempt from Inheritance Tax. These gifts will only qualify if you have enough income left after making them to maintain your normal lifestyle. These include: o monthly or other regular payments to someone o regular gifts for Christmas and birthdays, or wedding/civil partnership anniversaries o regular premiums on a life insurance policy - for you or someone else Non-exempt gifts will remain in the donor’s estate for seven years from date of gifting before dropping out of the IHT calculation.

Using the Personal Allowance Adam has not started taking any benefits from his pension fund yet & has been using his savings to fund his lifestyle since he left work in September 2014. As he has not used his Personal Allowance, or had any ‘relevant’ earnings since September 2014, he is now in a position to boost his pension fund & his income with a lot of help from the taxman. Here’s how Current rules allow a person with no ‘relevant’ earnings to make a gross pension contribtion in a tax year of £3,600 & receive 20% tax relief - the net cost is thus £2,880. If Adam then combines this with reclaiming tax relief from some previous years (by using what is called ‘carry forward’) he could then add another £10,400 to his one-off pension contribution, to make a total gross contribution of £14,000. Take off all the tax relief & Adam’s true cost is £11,200. Now for the fun part! Once the contribution is in his pension fund he could then take it all out TAX FREE with 25% of the £14,000 (£3,500) being taken as free cash & the remaining £10,500 taken as taxed income. Although the £10,500 is liable to income tax, the amount falls within Adam’s Personal Allowance. Voila! That is an increase of £2,800 (before charges) in potentially a few days. Want to know more? Do not hesitate to contact us if you would like further details.